Cochran v. People's Railway Company
| Decision Date | 31 December 1892 |
| Citation | 21 S.W. 6,113 Mo. 359 |
| Parties | Cochran v. The People's Railway Company, Appellant |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court.--Hon. Daniel Dillon Judge.
Reversed and remanded.
G. A Finkelnburg for appellant.
(1) The court erred in holding that the stipulation on the subject of damages for delay, contained in the written contract between the parties, should not be enforced. Worrell v McClinagham, 5 Strob. 115; Ward v. Building Co., 125 N.Y. 230; Railroad v. Rust, 19 F. 239; Hall v. Crowley, 15 Allen, 304; Wolf v. Railroad, 64 Iowa 380; Fletcher v. Dyche, 2 T. R. 32; Crux v. Aldred, 14 Week. Reports, 956; 1 Sedgwick on Damages [8 Ed.] sec. 419; Fruin v. Railroad, 89 Mo. 397; Morse v. Rathburn, 42 Mo. 594. (2) The court erred in its instructions on the measure of damages for delays in completon of buildings. See cases cited, supra. (3) The court erred in confining defendant's evidence to the general rental value of the building, without reference to the particular use for which defendant had caused it to be built, and without reference to the value which it had to defendant.
C. H. Chapin and Andrew Mackay, Jr., for respondent.
(1) The court did not err in holding that the stipulation on the subject of damages for delay contained in the written contract between the parties to this suit should be considered a penalty and not liquidated damages, and trying the case on that theory. 1 Sedgwick on Damages [8 Ed.] sec. 407, p. 584; Brennan v. Clark, 29 Neb. 386; Gower v. Saltmarsh, 11 Mo. 271; Stearns v Barrett, 1 Pick. 443; Muldoon v. Lynch, 66 Cal. 536; Colwell v. Lawrence, 38 N.Y. 71; Foley v. McKeegan, 4 Iowa 1; 1 Sedgwick on Damages [8 Ed.] p. 611, sec. 425, last part; Hamilton v. Moore, 33 Up. Can. Q. B. 529; Farnham v. Ross, 2 Hall (N. Y.), 167; Clements v. Railroad, 132 Pa. St. 445; Walsh v. McDonald, 85 Va. 500; Potter v. McPherson, 61 Mo. 240; Tayloe v. Sandiford, 7 Wheat. (U.S.), 13; Dennis v. Cummins, 3 J. Cases, 297; Shute v. Taylor, 5 Met. (Mass.) 61. (2) The court committed no error in its instructions on the measure of damages for delays in the completion of the defendant's building. See cases cited supra.
This is a suit at law for a balance on a building contract. Plaintiff claimed $ 3,285 due him on a contract price of $ 17,785, for building defendant an office building for its cable railway in the city of St. Louis.
The defendant in its answer claimed certain deductions for omissions made by the architect, also damages by way of counter-claim for defective material and unskillful workmanship, and a counter-claim for a delay of sixty-five days in the completion of the building at the rate of $ 50 per day as "liquidated damages."
The contract contained this stipulation:
During a trial before a jury the court held this clause to be a mere penalty and announced that it would try the case upon that theory, and compelled the defendant to show actual damages, to which ruling and announcement defendant excepted. Evidence was then introduced by both parties on the subject of the actual damages sustained by defendant by the delay, and defendant was by the court confined to the general rental value of the building without considering its special value or use to defendant or defendant's business, to which defendant likewise excepted. The court also refused an instruction asked by defendant to the effect that under the contract read in evidence defendant was entitled under its first counter-claim to $ 50 per day for every day which the jury might find from the evidence that the building was delayed from completion beyond the fifteenth day of December, 1889, through the fault of plaintiff; to which refusal defendant again excepted.
If the circuit court was wrong in its interpretation of the contract in this case, and the stipulation for $ 50 a day for each day the building was delayed was a legitimate ascertainment of the damages that defendant would suffer by the delay, and not a penalty provided against a breach of the contract, then the other question as to measure of damages will become immaterial, otherwise important.
In this case the amount fixed is denominated in the contract neither as "penalty" or "liquidated damages." The courts now generally agree that neither of these terms are conclusive in the construction to be placed on the agreement. To enable a court to determine whether the sum of $ 50 a day, which the contract provides plaintiff shall pay defendant, shall be regarded as liquidated damages, or as a penalty, must be gathered from the subject-matter of the contract, the language employed and the intention of the parties.
Various rules of interpretation have been adopted by the courts in their efforts to compensate the injured party for his loss, and at the same time avoid what they deem an unconscionable advantage over his adversary. The canons of construction applied by the courts are not arbitrary, nor has any respectable court assumed to deny to parties competent the right to make their own contracts. They have simply said that, reading the whole contract with reference to its subject-matter and the circumstances of the parties, under one state of facts, the stipulation created merely a penalty for the faithful performance of the agreement; and, under other circumstances, that it was liquidated damage.
In Morse v. Rathburn, 42 Mo. 594, Judge Wagner announced the rule in this state to be,
The element of uncertainty, the fact that the damage was incapable of exact ascertainment, has generally inclined the courts to construe the sum agreed upon as liquidated damages. Where, however, the amount stipulated to be paid by the defaulting party is disproportionate to the probable damage or to a readily ascertainable loss, the courts treat it as a penalty, in the nature of a security for performance. Many adjudicated cases in England, Canada and the states of our Union uphold the right of parties to stipulate that, for delay in the performance of building contracts, the builder shall pay a certain amount per day or week for every day or week the completion of the contract is delayed beyond the time fixed. 1 Sedgwick on Damages [8 Ed.] sec. 419, and cases cited in note a. An examination of these cases, however, confirms the view that the amount so agreed upon as liquidated damages must not be unreasonable and out of proportion to the probable damages.
Applying to this case the ordinary tests, is it or not unreasonable as liquidated damages? Viewing it from the point of an investment, the capital was $ 18,000, and for sixty-five days...
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